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1986 TAX FILING SEASON

TUESDAY, MARCH 4, 1986

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

SUBCOMMITTEE ON OVERSIGHT,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:40 a.m., in room 1100, Longworth House Office Building, Hon. J.J. Pickle (chairman of the subcommittee) presiding.

[The press release announcing the hearing follows:]

[For immediate release, Friday, Feb. 21, 1986]

HON. J.J. PICKLE (D. TEXAS), Chairman, SUBCOMMITTEE ON OVERSIGHT, COMMITTEE ON WAYS AND MEANS, U.S. HOUSE OF REPRESENTATIVES, ANNOUNCES A HEARING ON THE 1986 TAX FILING SEASON

The Honorable J.J. Pickle (D., Texas), Chairman of the Subcommittee on Oversight, Committee on Ways and Means, U.S. House of Representatives, announced today that the Subcommittee will conduct a hearing on the current condition of the 1986 tax return filing season. Specifically, the Subcommittee will review how well the ten Internal Revenue Service Centers are handling this year's filing season. The hearing has been scheduled for Tuesday, March 4, 1986, in the Main Committee Hearing Room, 1100 Longworth House Office Building, beginning at 9:30 a.m.

The Subcommittee will receive testimony from the Honorable Roscoe L. Egger, Jr., Commissioner of the Internal Revenue Service, who will be accompanied by the Taxpayer Ombudsman, Jack G. Petrie, and representatives from its Office of Returns and Information Processing, Computer Services, and Inspection. In addition, the General Accounting Office will report on its investigation into the current operation of the Service Centers, which it has conducted at the request of the Subcommittee on Oversight.

In announcing the hearing, Chairman Pickle made the following statement: "The 1985 filing season was marred by mistakes, problems, and delays. The cost to the Government and the public was enormous. Millions of taxpayers were seriously inconvenienced and in all too many cases suffered real hardship. The loss of taxpayers' confidence in IRS is frightening. With voluntary tax compliance at an all-time low, and federal deficits at an all-time high, we cannot afford a repeat of last year. The Commissioner of IRS has offered assurances that improvements have been made, and I want to believe he is right. However, seeing is believing, and this hearing will be our first hard look at how the IRS is handling its 1986 workload."

Chairman PICKLE. The subcommittee will come to order, please, and we will ask our guests to have a seat so that we might proceed. Our witness this morning is the Honorable Roscoe Egger, Commissioner of the Internal Revenue Service, who I hope comes to bring us good news this morning. Commissioner, if you'll have a seat, we will proceed.

Almost exactly a year ago today, the Subcommittee on Oversight had a hearing on an Internal Revenue Service problem that affected thousands of taxpayers. That hearing uncovered only the tip of the iceberg, as we sadly learned during the rest of the year.

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Reports of problems continue to pour in. No one will deny that the 1985 filing season was a disaster. All will agree that we cannot have a repeat of last year.

So we are here today, at the midpoint of the 1986 filing season, to hear how IRS is handling tax returns and processing refunds

this year.

During the December 1985 hearings, the IRS Commissioner made certain assurances to this subcommittee. We will hear from Commissioner Egger today on just how successful those assurances have been to date.

We will also hear from the General Accounting Office, which has just returned from visiting each of the 10 IRS Service Centers, as requested by this subcommittee, on how the filing season is progressing so far.

Before we hear from Commissioner Egger, I do want to say that I am encouraged that this year will be a marked improvement over last year. Taxpayers should feel more confident and encounter fewer problems in dealing with the Internal Revenue Service.

Sheer hard work and determination pulled us through the mire of last year, but even so, serious questions still remain. Can IRS be given a clean bill of health? Good or bad, the public has a right to know. The success of our voluntary tax system demands no less than constant vigilance.

Mr. Schulze, would you care to make an opening statement?
Mr. SCHULZE. Yes, thank you, Mr. Chairman.

Mr. Chairman, I appreciate your calling this important meeting to hear from Commissioner Egger and his staff and the General Accounting Office concerning the status of this year's filing season. I am certain that they will give us a complete review of the status of this year's filing season and whether or not there are potential problems which could disrupt the filing this year.

It is my hope that this hearing is being held late enough in the filing season so that any problems which arise have been identified, and yet early enough in the filing season that Congress will be able to provide the Commissioner assistance which he may need in resolving those which do arise.

Of course, particularly in view of last year's difficulties, I hope that we will hear today that the IRS has plotted a course for 1986 which is restoring taxpayer confidence in the Service and in our voluntary system of tax compliance.

Of particular importance to me are what changes have been implemented by the IRS to improve taxpayer services and to ensure that individuals can expect timely receipt of tax refunds.

Also of particular interest to me are the figures on correspondence inventory. And I am quite concerned that the ending inventory, in January of 1985, according to our figures was 118,922 in the Philadelphia Service Center. And in 1986 it has about doubled to 221,845. And I hope the Commissioner will address that in his testimony.

Commissioner Egger has appeared before this subcommittee four times last year on this and related matters. And let me say once again, for the record, that I have the utmost respect for Commissioner Egger and admire the effective leadership he has displayed in his 5 years as Commissioner. He has presided over the IRS in a

period of transition which has not been without problems. He has handled them in a very diplomatic way and a way which has reflected well upon himself and the Service.

And I would like to take this opportunity to wish the Commissioner well in whatever he desires to pursue in the future. Thank you, Mr. Chairman.

Chairman PICKLE. Thank you, Mr. Schulze.

Now Commissioner Egger-do any of the other members have any preliminary statements to make?

Commissioner Egger, we ask you to proceed. We are glad to have you here. We are anxious to hear what you can tell us about what we can expect for 1986.

STATEMENT OF HON. ROSCOE L. EGGER, JR., COMMISSIONER OF INTERNAL REVENUE, ACCOMPANIED BY JAMES I. OWENS, DEPUTY COMMISSIONER; THOMAS LAYCOCK, ASSISTANT COMMISSIONER FOR COMPUTER SERVICES; AND HENRY H. PHILCOX, ACTING ASSISTANT COMMISSIONER FOR RETURNS AND INFORMATION PROCESSING

Mr. EGGER. Thank you, Mr. Chairman.

Let me apologize for being a few minutes behind the hour appointed here. I was under the impression that we would not be the first witness and I had other urgent things that I needed to deal with. I apologize very much.

I appreciate the opportunity to be here today to report on this year's tax processing season. With me today are a number of executives including the Taxpayer Ombudsman and representatives from other IRS functions including returns processing and computer

services.

Incidentally, at the table here with me, on my far right, is Henry Philcox, who is the Acting Assistant Commissioner for Returns and Information Processing. Next to me is the Deputy Commissioner James Owens. And on my left is Tom Laycock who is the Assistant Commissioner for Computer Services.

Chairman PICKLE. We're glad to have you gentlemen with us.

BACKGROUND OF THE 1986 FILING SEASON

Mr. EGGER. When I appeared before you at your December hearing, my testimony focused on 14 major areas that we were addressing in preparation for this filing season. These areas included all aspects of processing operations, from increased computer capacity to better control procedures to enhanced training. Further, I noted the emphasis we were placing on quality at all levels of the Service for the 1986 filing season.

I am pleased to report that to date, with a little more than half the filing season behind us, the reports are generally very good. I am still concerned with certain problem inventories in service centers, but I am pleased with our progress in other areas. By all measurements, the extraordinary efforts made by IRS managers and employees are paying off.

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